Going Green with Policy Incentives: Comparing the Use of Subsidies and Taxes to Reduce Transportation Emissions
Journal IssueVolume 27, 2020
This article addresses the need for the United States to reduce emissions from the transportation sector. In order to concisely evaluate the political discussion of promoting renewable energy use and discouraging reliance on fossil fuels, this article focuses on the adoption of electric and hybrid vehicles as a means of illustrating the larger policy challenge of how to maximize policy effectiveness at reducing emissions while minimizing economic disruption. The article estimates the magnitude of electric and gas-powered vehicles purchases in response to either a subsidy or a tax and discusses the positive and negative outcomes of each policy approach. The article finds that while a tax on carbon emissions may be most effective in removing gas-powered vehicles from the road, it will disproportionately affect lower-income households. Implementing substantial subsidies for electric vehicles, funded through a smaller tax on carbon emissions, is suggested as a solution to reduce the regressive impacts of a standalone carbon tax.